The instability of some non-full-support steady states in a random matching model of money

Pidong Huang () and Yoske Igarashi

Journal of Mathematical Economics, 2014, vol. 55, issue C, 177-185

Abstract: Zhu (2003) shows existence of full-support monetary steady states with strictly concave value functions in a random matching model with individual money holdings in {0,1,2,…,B} for a general B. He also shows that corresponding to each such steady state is an l-replica steady state for each l∈N: money is traded in bundles of l units, the support is {0,l,2l,…,lB}, and the value function is a step-function with jumps at points of the support. We show that such l-replicas are unstable if the underlying full-support steady state is a pure strategy steady state and if the support of the initial distribution is not {0,l,2l,…,lB}.

Keywords: Random matching model; Monetary steady state; Instability; Zhu (2003) (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:55:y:2014:i:c:p:177-185

DOI: 10.1016/j.jmateco.2014.09.005

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